In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will not happen?
A)Inefficiencies will occur.
B)Negative externalities will be observed.
C)The market prices of products produced by firms will be too low relative to the social optimum.
D)Output of the good being produced will be too low.

Question

In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will not happen?
A)​Inefficiencies will occur.
B)​Negative externalities will be observed.
C)​The market prices of products produced by firms will be too low relative to the social optimum.
D)​Output of the good being produced will be too low.

Quizplus · Accepted Answer

If firms are able to shift costs onto others, they will produce more output than is socially optimal, not less. Therefore, option D is not a likely outcome in this scenario. However, options A, B, and C are all likely outcomes when firms can shift costs onto external parties.

In a Market Where Firms Are Able to Reduce Their